Health Care Current: November 5, 2013

Exponential times call for innovative minds

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Exponential times call for innovative minds

My Take

Artificial intelligence, crowd-sourcing, 3-D (and 4-D) printing, advanced robotics, synthetic genetics and nanotechnologies…fast and furious, these “exponential” technologies are creating the prospect of massive disruption for everything and everyone in their paths. Companies that take the time to truly understand the potential impact of exponentials—and to develop innovative solutions to leverage them—can emerge as leaders.

A core challenge facing the industry, however, starts with understanding the potential impact of “exponentials.” And the potential is nothing short of astounding. Leading experts at Singularity University believe the principle of Moore's Law—which says overall processing power for computers will double every two years—will continue unabated for at least another 15 years! The implications this will have for computing power, reduction in size and increased performance cannot be overstated, or for some, imagined.

The impact of exponentials is already being seen in a number of ways across the health care industry, for example, through the Qualcomm Tricorder XPRIZE competition. Advances in artificial intelligence, wireless sensing, imaging diagnostics, lab-on-a-chip and molecular biology are serving as the foundation for teams pursuing the $10 million award. The Tricorder—a hand-held diagnostic tool that can diagnose a set of diseases independent of a health care professional or facility—is around the corner. When this becomes reality it will have an enormous impact on physicians, hospitals, life sciences and government health agencies.

My take is that no business is immune from exponential technologies. Those who delay or misjudge the impact may find themselves outflanked by a new wave of emerging companies or forward-looking incumbents focused solely on utilizing exponentials to capture the attention of consumers, patients and members.

A surefire way to harness the impact of exponentials in our industry is to build and champion a culture of innovation. I recognize that might be easier said than done; innovation is one of the most misunderstood concepts in business today. Some people I talk with think it’s the exclusive job of the CEO, while others interpret it as brainstorming among research and development folks. But, to me, innovation is more of a mindset and a discipline—one that naturally (and continuously) challenges convention for the purposes of fueling growth.

The beauty of it is that we’ve all “innovated” before in some form or another, but the reality is that it’s not a ‘nice to have’ anymore. Exponential technologies are transforming our world. Now is the time for us to come together as an industry to truly shape the future of life sciences and health care. I’m excited for the ride…are you?

P.S. Last spring, Deloitte formed a strategic alliance with XPRIZE, an organization that works to solve global challenges through the creation of large-scale incentivized competitions and Singularity University, a company that utilizes accelerating technologies to address humanity’s hardest problems.

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Implementation & Adoption

HHS issues guidance on enrollment dates and penalties

According to guidance issued by the Centers for Medicare and Medicaid Services (CMS) Center for Consumer Information & Insurance Oversight, individuals will now have until March 31, 2014 instead of February 15th to enroll in an insurance plan before being subject to a penalty under the Affordable Care Act (ACA). Many stakeholders voiced concern that the potential time gap between enrollment and coverage effective dates for coverage purchased through a health insurance exchange could leave some individuals liable for a shared responsibility penalty payment under the terms of the “allowed” short coverage gap exemption. The guidance stated: “[the U.S. Department of Health and Human Services (HHS)] has determined that it would be unfair to require individuals in this situation to make a payment…accordingly, HHS is exercising its authority to establish an additional hardship exemption in order to provide relief for individuals in this situation.”

Medicare premiums will remain the same or slightly decrease in 2014

According to CMS data released last week, 2014 Medicare premiums will either remain the same or decrease slightly. CMS also reported that Medicare spending over the past five years has grown more slowly than at any other period in Medicare history.

Medicare Part A: premiums will decrease by $15 in 2014, bringing the new monthly premium to $426.Note: roughly 99 percent of Medicare beneficiaries do not pay a Part A premium because they meet the requirement of having 40 quarters of Medicare-covered employment. Beneficiaries who have accumulated 30-39 quarters of Medicare-covered employment can buy into Part A and pay a reduced monthly premium of $234 in 2014; a $9 reduction from 2013. Medicare Part A covers inpatient hospital, skilled nursing facility and some home health care services.

Medicare Part B: the standard Medicare Part B monthly premium will remain at $104.90. The Part B deductible will stay at $147. Part B covers physicians’ services, outpatient hospital services, certain home health services, durable medical equipment and other items.

CMS re-opens ACO applications for kidney care

Last week, CMS announced that it will re-open the request for applications for providers interested in establishing kidney treatment accountable care organizations (ACOs) sometime this winter. Patient safety advocates, including the American Society of Nephrology (ASN), expressed support for this announcement. ASN had previously urged CMS to examine quality and performance measures and to work with smaller stakeholders to establish appropriate benchmarks. CMS has pushed back the application deadline for the program on three different occasions and stakeholders have continued to express concern and frustration with the most recent updates to the performance benchmarks released in August.

2014 PCORI budget increases to $650 million

The California Health Institute released a report detailing the Patient Centered Outcomes Research Institute’s (PCORI) outlays between 2014 and 2019. PCORI’s budget will increase to $650 million dollars annually, more than double its 2013 budget of $320 million, with funds being allocated towards comparative effectiveness research to study product-to-product comparisons and health systems. In 2014, PCORI plans to allocate $270 million for targeted research projects. The increase in funding is a result of a surcharge under the ACA paid by health plans on Medicare and commercial health insurance premiums, which will increase from $1 to $2 per person in 2014. While many stakeholders in the industry were concerned that the majority of the funds would go towards health technology assessment, two-thirds of PCORI’s 2014 budget will be focused on health care system research. To date, PCORI has granted $243 million in awards in the following areas:

Nearly half of all ‘young invincibles’ may be eligible for coverage for under $50 after subsidies

A new report released by HHS found that about five in 10 uninsured adults between age 18 and 34 who qualify for coverage on health insurance exchanges (HIXs) could pay $50 or less per month for health care coverage after tax credits. The report was based on an analysis done in 34 states with federally facilitated exchanges (FFE) and state partnership exchanges (SPE). The analysis concluded that of the 7.2 million eligible uninsured young adults, 2.9 million may be eligible for coverage. Sixty-six percent of those eligible could purchase a bronze plan for $100 or less and about 46 percent could do so for a premium of $50 or less per month. The report also found that, in addition to the young adults eligible for HIX tax credits, 14 percent (one million) of young adults in states that expanded Medicaid eligibility may qualify for Medicaid. Young adults remain a key target group for health insurers, as they are more likely to lack coverage than any other age group and because they are generally healthy and help to balance the risk pool.

Note: young adults ages 18 to 34 in households of any type (e.g., own-family household, single-person household, living away at college, parents’ household) account for 41 percent of the 41.3 million eligible uninsured nationwide.

On the Hill & In the Courts

Senate may vote on drug compounding bill this week

The Senate may vote on The Drug Quality and Security Act (H.R. 3204) before the end of this week. The bill was drafted in response to the fungal meningitis outbreak of 2012 that killed 64 of the 751 infected patients who received tainted steroid injections as a result of poor conditions in the compounding pharmacy where the drug was manufactured. The Pharmaceutical Distribution Security Alliance, the American Society of Health-System Pharmacists and Pew Charitable Trusts have expressed strong support for the bill which passed the House of Representatives in September. However, some Senators expressed concern that there is a lack of clarification regarding the U.S. Food and Drug Administration’s (FDA) enforcement capabilities for office-use compounding. Unlike earlier versions, the latest version of the bill does not specifically include language providing details around office-use compounding. Senators Tom Harkin (D-IA) and Lamar Alexander (R-TN) have indicated that they intend to elaborate on the office-use compounding portion of the bill in a letter and in colloquies. Under the Act, traditional compounding pharmacies will remain under the jurisdiction of state boards of pharmacy while larger compounding pharmacy operations will be regulated by the FDA.

Lawmakers drafting bill to delay ACA insurance premium tax

A bipartisan bill to establish a two-year delay on the health insurance premium tax under the ACA is expected to be introduced as early as this week. The tax, which applies to Medicare Advantage Plans, Medicare Part D, Managed Medicaid Plans and commercial plans, is one of the many insurance reforms set take effect January 1, 2014. The tax is projected to generate $102 billion in federal revenue over the next decade. Health plan stakeholders, including America’s Health Insurance Plans, have called for a delay in the tax, claiming the tax has already caused insurance premiums to rise for businesses and individuals. Several state governors have also expressed concerns about the tax’s application to Medicaid managed-care plans, arguing that requiring Medicaid plans to pay the tax could result in the cost of the tax being passed to state Medicaid programs. Delaying implementation of the tax by two years could cost approximately $15 billion, according to InsideHealthPolicy.

Physicians concerned with implications of CMS’ interpretation of the Sunshine Act

In a letter sent to HHS Secretary Kathleen Sebelius, more than 70 physician organizations, including the American Academy of Family Physicians, American Psychiatric Association and the Infectious Diseases Society of America, expressed concern regarding CMS’ interpretation of the Physician Payments Sunshine provision of the ACA (a.k.a. Sunshine Act, Section 6002) and its impact on scientific peer-reviewed medical journals and textbooks. The letter states that CMS’ interpretation is in direct opposition to the statute and the Congressional intent of the ACA and could harm patient care. Congress excluded “educational materials that directly benefit patients or are intended for patient use” from the reporting requirement. CMS, in its interpretation, concluded that educational items that are not intended for patient use, but are still important to physicians, do not fall within the statutory exclusion. CMS also stated that even though educational items for physicians may have “downstream” benefits for patients, they “are not directly beneficial to patients, nor are they intended for patient use.” The physician groups argue that medical textbooks, peer-reviewed journal reprints and medical literature supplements are essential tools for physicians to stay informed about the latest and most promising medical care and CMS’ interpretation “could inadvertently prevent the timely distribution of rigorous scientifically-reviewed medical information to clinicians and patients and thereby undermine efforts to improve the quality of care provided to patients.”

Background: per the ACA provision, drug and device manufacturers and group practicing organizations were to start collecting data January 1, 2012 with public reporting by September 30, 2013. The goal of the Sunshine Act is to promote transparency and reduce health care costs and it stipulates that manufacturers of covered drugs, medical supplies, devices and biological products must report to CMS on an annual basis any payment, ownership, investment interests, or other transfers of value going directly to physicians and teaching hospitals. Penalties for violations range from $1,000 to $100,000.

Last Wednesday, the Senate Finance and House Ways and Means committees released draft legislation regarding the Medicare Sustainable Growth Rate (SGR), which controls costs in Medicare by determining physician payment rates. The proposed legislation would take effect in 2015 and would replace the current SGR by combining the three quality incentive programs currently in use into one budget-neutral, value-based performance payment program. Payment adjustments for physicians would start in 2017, while physician assistants, nurse practitioners and clinical nurse specialists would see payment adjustments start in 2018. The bill proposes notable changes including:

A 10-year pay freeze for doctors through 2023, but allowing for pay bonuses based on positive performance outcomes.

The option for doctors to participate in “two-sided” alternative payment models, including ACOs, in which they would receive a 5 percent pay increase until 2021, in addition to any shared savings the doctors would realize from the ACOs.

Ability for medical professionals to participate in alternative payment models (which could include penalties for poor performance or outcomes) in exchange for a 2 percent pay increase starting in 2024. Medical professionals not participating in alternative payment models would get a 1 percent payment increase per year.

Around the Country

The National Association of Medicaid Directors is concerned that some individuals applying for Medicaid benefits via the Healthcare.gov website may already be receiving benefits. Healthcare.gov was originally designed to notify applicants as to whether they were eligible for Medicaid or private health insurance and to then send the appropriate information to state officials. However, the federal system is not yet able to transfer applicant information to state offices at this time. As such, federal officials have sent states basic information about applicants, such as their names, so state officials can compare the federal list of applicants with their own current list of Medicaid beneficiaries. This has raised concerns that state Medicaid offices may not be able to handle the workload of verifying applicant information in a timely manner. In addition, state officials are reporting confusion from applicants applying for insurance via Healthcare.gov. In response, CMS has started sending letters to applicants informing them of how to obtain insurance via Medicaid and the health care marketplaces. The Congressional Budget Office (CBO) estimates that nine million people will gain Medicaid benefits starting in 2014.

Study examines increase in prison health care expenditures

According to a report released last week by the Pew Charitable Trusts, health care spending in state correctional facilities increased significantly from 2001 to 2008. Several factors were responsible for the increase in health expenditures, including an increase in prison inmates, the aging of prison inmates, the inherent challenges of health care delivery in a correctional facility environment and the higher prevalence of chronic and infectious disease in prison populations. Highlights:

Forty-two of the 44 states studied experienced a median growth rate of 52 percent and 12 states saw their prison health care costs rise by at least 90 percent. Texas and Illinois were the only states that had inflation-adjusted decreases in health expenditures in the same time period.

In 39 of the states, prison health care costs claimed an increasing share of the total institutional corrections budget, increasing on average from 10 percent in fiscal year (FY) 2001 to 15 percent in FY2008.

The researchers discussed strategies to reduce prison health expenditures with correctional department leaders and identified the most frequently mentioned approaches:

Incorporating telehealth technology

Outsourcing health care services

Enrolling eligible prisoners in Medicaid

Employing geriatric or medical parole policies for inmates who no longer pose a public safety risk

Michigan HIEs partner to share patient data

The two largest health information exchanges (HIE) in Michigan, Michigan Health Connect in Grand Rapids and Great Lakes Health Information Exchange in East Lansing, announced an agreement last week to share patient medical data through a secure exchange. Approximately 3,000 physician offices and more than 80 percent of the state hospitals will have access to patient data as a result of the agreement. The HIE intends to improve coordinated care by making patient information more easily accessible for hospitals and physicians. In 2006, former Governor Jennifer Granholm (D) signed a plan to create nine HIEs to share patient data online, but several factors, including a lack of funding resources derailed the plan.

Breaking Boundaries

WebMD adds patient engagement portal capabilities

WebMD, a health, medical news and information resource, announced last week that it has acquired Avado Inc., a patient engagement technology platform, for an undisclosed amount. According to the announcement, the acquisition of Avado Inc., a developer of cloud-based patient relationship management tools and technologies, will accelerate the company’s efforts to increase communication between patients with their health care providers. WebMD's current platform provides physicians with the use of its mobile application to securely send health education and instructions on medical conditions, procedures and prescription drugs to their patients who also use the mobile app. The patient portal is designed to facilitate physician-consumer interaction through messaging, reminders and appointment scheduling using electronic medical record technology.

FDA gives first “breakthrough" drug approval

Friday, FDA granted its first drug approval under the Breakthrough Therapy Designation Program, created under the FDA Safety and Innovation Act, for a therapeutic drug combination to treat patients with previously untreatable chronic lymphocytic leukemia (CLL). In a study of 365 patients, Genentech's Gazyva combination treatment showed significant improvement in progression-free survival: an average of 23 months compared with 11 months using the previous treatment alone. According to the National Cancer Institute, 15,680 Americans will be diagnosed with CLL and 4,580 will die from it this year.

Background: under the FDA Safety and Innovation Act of 2012, a sponsor (i.e., manufacturer) of a drug may request for an expedited review of such drug if the drug alone, or in combination with one or more other drugs, is developed to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies. No later than 60 days after the request is submitted, FDA must make a determination to either grant or deny the request for breakthrough therapy designation.

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